Credit cards have come to seem like an essential tool in life and business, something almost everyone has, and almost every place of business accepts as payment. The problem is that credit cards, which should ideally be paid off every month, can easily lead to mounting debt that increases over time as you accrue additional interest on any unpaid balances.
In certain circumstances, it makes more sense to not have a credit card. Here are the signs that you should hold off or press pause on credit cards.
You’re Already in Debt
If you’re already struggling financially and are already in debt, Adam Garcia, owner of The Stock Dork, urges, “Don’t make it worse by putting yourself into a scenario where you could end up taking on more debt, whether it’s from student loans or other sources of credit. A second financial commitment, even if it is only the bare minimum, may cause your monthly budget to become unmanageable.”
A worst case scenario, such as defaulting on payment for more than 30 days, can have a substantially negative impact on your credit rating.
“However, if you have enough money to pay all of your monthly expenses on time, you may still be able to receive a credit card. If you only use your card for purchases that you would normally make without the card, you’ll be better off.”
You Spend Beyond Your Means
“The biggest sign you should not have a credit card is that you’re constantly accumulating debts and spending beyond your means,” said Clint Proctor, lead editor at Forbes Advisor.
“If you always spend more than what you earn, which can also mean you’re always getting into debt, the first thing you should focus on is fixing your unhealthy spending habit.”
He cautions against getting or keeping a credit card under these circumstances, because “you’ll only dig yourself deeper.”
“Once you accumulate more debts on a credit card, you’ll end up paying very high interest on those debts, which can be very difficult if you spend above your means. Before getting a credit card, make sure that you pay off your debts first or learn how to control your spending,” he said.
You Make Frequent Balance Transfers
“A sign that you probably shouldn’t have a credit card,” according to Matt Gray, CFP, founder of AnthroFi Wealth Group, is if you find yourself transferring your debt balance to a new 0% interest card every 12 to 18 months. “People who aren’t responsible with debt often have to use creative tricks in order to maintain their ability to make payments. Unfortunately, they don’t use it effectively to pay down debt.”
You’ve Maxed Out Cards
“Another key indicator that you should not be using credit,” Gray said, is maxing out a credit card. “If you have utilized your entire credit card balance then you should be working on a plan to get rid of credit cards completely.”
Not only does this keep you in debt, but utilizing too much of your credit limit causes damage to your credit score, not to mention high interest rates on that credit card debt.
You Have a Card for Every Store
If you’ve got a credit card for all of your favorite stores — Target, Best Buy, Macy’s, Nordstrom’s, etc. — you could be getting yourself into trouble. Gray said, “I’m not saying that you should get rid of all department store cards. But if you continue to open a new card everywhere you shop, you probably need to evaluate how you are using debt.”
You’re Rolling Over a Credit Balance for 6 Months or More
It’s too easy to treat credit cards as a place to store debt you plan to get to eventually, rather than attempting to pay them off every month. Gray said, “you should be concerned if you’ve had a credit card balance roll over to a new month more than six months in a row.”
“It happens to all of us that we get caught off-guard or overextend ourselves a bit for a trip. It’s not good, but when that happens it should be a main priority to pay that debt off. If it isn’t and you’re getting comfortable carrying an outstanding credit card balance, it may be time to keep the plastic in your pocket.”
You’ve Exhausted Your Savings or Don’t Have Any
Before applying for a credit card, you should have some savings to prove you are financially responsible enough to only use your credit card when you need it. If you have exhausted your savings or don’t have any, maybe you should wait until you are financially ready and stable to manage a credit card and its monthly payments to avoid falling in debt.
You Don’t Have Stable Income
Applying for a credit card means you can expect credit card bills at the end of each billing cycle, or every month. If you don’t have a stable source of income, you might constantly struggle with the billings, and could easily end up in debt. So, first, secure a reliable income stream, and build your savings before getting a credit card.
You’re Missing or Making Late Payments
If you’re missing payments or making them late, this is not a good sign of responsible credit card use.
A missed payment charge could be yet another sign that you aren’t ready for a credit card since it hurts like a harsh slap to the wrist. It requires effort to use one or more credit cards responsibly. If managing your credit cards is something you’re not ready for, you might want to skip it.
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